Sri Lanka must await B-minus credit upgrade to tap global markets

Sanath Gamage 

• Asserts Sri Lanka needs to demonstrate policy consistency to the world
• While island nation has seen a marked improvement in foreign currency liquidity, following IMF programme, it is still not attractive enough for offshore lenders, given its high-risk profile

Sri Lanka must wait for a sovereign credit upgrade to B-minus level to access global financial markets, where the country could also start to experience significant foreign investment flows, a senior global banker said.

Although many global players are making inquiries, Citibank Head of Treasury Sanath Gamage noted that Sri Lanka needs to demonstrate policy consistency to the world.

He shared these remarks while joining a panel discussion at Softlogic Investor Forum 2025, held in Colombo this week, organised by Softlogic Stockbrokers.

In this context, he advised the government to wait until the country receives a credit rating upgrade to B-minus level.

“So, we have to come to those ranges, so that we will get a higher rating. Currently, triple C plus is normally called a junk rating. We have to look at being at a B-minus or that level. That’s where I think it’s the best time we should access financial markets, even though it looks okay now,” Gamage explained.

He noted that Sri Lanka has seen a marked improvement in foreign currency liquidity, following the International Monetary Fund (IMF) programme and the policy stability assured by the new government, which has given significant confidence to the offshore lenders.

However, Gamage pointed out that Sri Lanka is still not attractive enough for the offshore lenders, given its high-risk profile.

“Most of these offshore lenders look at RWA, which stands for risk-weighted assets. A risk-weighted asset is like the capital we put in—it’s a weight that we assign based on risk. So, based on that policy, we look at countries around the globe and decide where CitiBank should put our capital. Given that Sri Lanka’s rating is a triple C plus, our risk is very high. We are looking at higher returns (10-12 percent), which is sometimes not practical. That’s the issue we are facing at the moment,” he elaborated.

Therefore, he emphasised that it is critical for the country to maintain financial discipline, which will lead to a gradual improvement in credit ratings.

“We will see more and more lenders wanting to lend money to Sri Lanka,” he added.

Commenting on the interest rates, he opined that there could be some pressure in the second half of the year.

“But I don’t think it will be significant,” Gamage added.

Sri Lanka is planning to borrow around Rs.2.2 trillion from both domestic and foreign sources to fund the budget deficit this year.

Source: Daily Mirror